Should I Refinance My Mortgage?
Mortgage rates are at historical lows. A few years ago, it was unheard of to get a mortgage rate at or below 5.0% APR. Today, that’s the norm, which makes it tempting to refinance a mortgage with a higher rate. Is now the right time for you?
Refinancing your mortgage could lower your monthly mortgage payment considerably. It could also cost you a lot of extra money and prolong the life of your mortgage loan, if you’re not careful. The cost to close a mortgage loan averages from 1 percent to 3 percent of your loan balance. You also have to take into consideration any down payment that may be required, as well as appraisal fees, title insurance fees, etc. For a $150,000 home, you’re looking at somewhere between $3,000 and $6,000 in closing costs and fees. If your monthly payments go down by $100 a month, it will take about two and a half years to recover $3,000 and five years to recover $6,000.
Using this specific scenario, it would most likely make sense to refinance your mortgage if you plan to be in your house at least five more years and you can keep closing costs/fees at or near $3,000. It also may make sense to refinance if you currently have an Adjustable Rate Mortgage (ARM), and you refinance to a fixed rate mortgage.
· Your property value has gone down
· You have been paying on your current mortgage for a long time or only have a few years left on your loan
· You have already reduced your equity with a second mortgage or home equity loan
Mortgages can be complex, and there are so many different scenarios to consider, including credit scores, loan terms, equity and more. If you’re considering refinancing your home, we suggest starting with our online mortgage calculator. By plugging in how much you want to refinance and how much your property is worth, you will get an estimate of what your monthly payments will be (not including escrow for property taxes and other fees) and an estimate on closing costs and fees, for just about every mortgage loan type and term we offer.
You can also e-mail one of our mortgage professionals or call them at 972.629.7897. They’ll help you determine if it makes sense to refinance your mortgage.
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